Interest Rate Update (September 2024)

The following graph shows movements in both the 6 month and 3 year Bank Bill yield rates, for the period January 2018 to date. These rates are wholesale rates which are net of any margin charged by financial institutions. It is not uncommon for retail premiums for 3 year fixed rates, to be 0.30% pa or 30 basis points above the wholesale premium.

Currently the 6 month wholesale Bill rate is 4.53% pa and the 3 year wholesale Bill rate is 3.57% pa, a discount of 0.96% pa or 96 basis points for the longer term. Rates have moved within a relatively narrow band during the last 12 months, but with a gradual increase in the spread between short and longer term rates, with longer term rates decreasing more rapidly than shorter term rates. This is depicted by the figures of 12 months ago, where the 6 month rate was 4.37% and the 3 year rate 3.97%, a discount of 0.40% or 40 basis points for the longer-term.

Despite some parts of the economy experiencing economic pain from current interest rates, inflation continues to be running ahead of the RBA’s preferred level. There has been much conjecture recently as to the primary causes of the continuing high inflation; excessive government spending, or the RBA’s monetary policy not being tough enough.

Either way, it appears that clients are unlikely to see any significant interest rate relief on their borrowings until 2025.

With a Federal election due before May next year, the Federal Government is unlikely to cut expenditure which would be electorally unpopular, plus the RBA may in fact increase official interest rates once more, in their attempt to bring inflation down to their stated target level.

An increase in the discount between short term interest rates and longer term rates is encouraging for the medium to longer term. The immediate impact of this, is that the fixed interest rate for Equipment Finance, should ease sooner than will short term rates charged by banks for term lending.